Net income (loss) attributable to Subordinate and Multiple Voting Shares

5.7

4.0

9.7

2.0

Net income (loss) per share - Basic

0.26

0.18

0.44

0.09

- Diluted

0.26

0.18

0.44

0.09

Highlights

Third Quarter Fiscal 2013 (unless otherwise noted, all comparisons are to the third quarter of fiscal 2012):

Net earnings1 amounted to $5.7 million or $0.26 per share compared to $4.0 million or $0.18 per share last year. Excluding currency impacts, the Company would have reported net earnings1 of $5.5 million or $0.25 per share this year compared to $2.1 million or $0.10 per share last year. Further excluding the results of Velan ABV S.p.A. ("ABV"), an Italian valve manufacturer acquired in the prior fiscal year, and the effects of purchase price accounting, the Company would have reported net earnings1 of $5.6 million or $0.25 per share this year compared to $4.7 million or $0.21 per share last year.

Net new orders received ("bookings") amounted to $83.3 million, a decrease of $10.9 million or 11.6% compared to last year. Excluding currency impacts, the decrease would have been $21.2 million or 22.5%. The Company ended the quarter with a backlog of $575.7 million, a decrease of $86.1 million since the beginning of the current fiscal year. Excluding currency impacts, the backlog would have decreased by $76.3 million over the same period to $585.5 million.

Sales amounted to $134.2 million, an increase of $15.3 million or 12.9%. Excluding currency impacts, sales would have increased by $21.3 million or 18.1%.

Gross margin increased by 1.8 percentage points from 23.0% to 24.8%. Excluding currency impacts, the gross margin percentage would have increased by 2.5 percentage points in the quarter. Further excluding the results of ABV and the effects of purchase price accounting, gross margin would have increased by 0.9 percentage points in the quarter.

Foreign currency impacts:

Based on average exchange rates, the euro weakened 5.7% against the U.S. dollar when compared to the same period last year. This weakening resulted in the Company's net profits from its European subsidiaries being reported as lower U.S. dollar amounts in the current quarter.

Based on average exchange rates, the Canadian dollar strengthened 0.5% against the U.S. dollar when compared to the same period last year. This strengthening resulted in the Company's Canadian dollar expenses being reported as higher U.S. dollar amounts in the current quarter.

The Korean won strengthened 4.7% against the U.S. dollar when comparing the spot rate at the beginning of the period to the period end rate. This strengthening resulted in the Company recording foreign exchange gains in the current quarter upon conversion of the balance sheet of its Korean subsidiary whose functional currency is the U.S. dollar.

The net impact of these three currency swings was generally favourable to the Company's quarterly results since the positive impact of the stronger Korean won outweighed the negative impacts of a weaker euro and stronger Canadian dollar.

First Nine Months of Fiscal 2013 (unless otherwise noted, all comparisons are to the first nine months of fiscal 2012):

Net earnings1 amounted to $9.7 million or $0.44 per share compared to $2.0 million or $0.09 per share last year. Excluding the results of ABV, the effects of purchase price accounting and currency impacts, the Company would have reported net earnings1 of $12.0 million or $0.54 per share this year compared to $5.7 million or $0.26 per share last year.

Bookings amounted to $273.4 million, a decrease of $129.7 million or 32.2% compared to last year. Excluding currency impacts, the decrease would have been $113.1 million or 28.1%.

Sales amounted to $358.5 million, an increase of $39.1 million or 12.2%. Excluding ABV and currency impacts, sales would have increased by $37.3 million or 12.3%.

The Company used net cash2 from operations of $8.6 million in the period. This use of net cash2 was primarily attributable to increases in accounts receivable and inventories, which was partially offset by positive cash earnings in the period. The Company ended the period with net cash2 of $5.5 million.

The Company generated net cash2 from financing activities of $8.6 million in the period. This source of net cash2 was principally from a $20.7 million increase in long-term debt. The Company is using the proceeds of this debt to fund its growing working capital needs, particularly with respect to inventory purchases to service its large backlog, to continue to improve its production capacity with investments in machinery and equipment, and to fund various activities in its overseas operations, particularly in Asia.

Based on average exchange rates, the euro weakened 9.3% against the U.S. dollar when compared to the same period last year. This weakening resulted in the Company's net profits from its European subsidiaries being reported as lower U.S. dollar amounts in the current period. The Canadian dollar weakened 1.4% against the U.S. dollar when compared to the same period last year. This weakening resulted in the Company's Canadian dollar expenses being reported as lower U.S. dollar amounts in the current period. The net impact of these two currency swings was generally unfavourable on the Company's results for this period since the positive impact of a weaker Canadian dollar was outweighed by the negative impact of a weaker euro.

1 Net earnings or loss refers to net income or loss attributable to Subordinate and Multiple Voting Shares.

2 Non-GAAP measures - see explanation below.

"We are pleased that the positive sales and profit trend noted in our second quarter continued and improved in our third quarter," said John Ball, CFO of Velan Inc. "The pressure is easing on our backlog and we are benefitting from the increased flow of shipments. We continue to see opportunities in several foreign markets as demand in our key end-user markets is generally strong and we are focusing our efforts to capitalize on these opportunities."

Tom Velan, President and CEO of Velan Inc. said, "We had record sales of $134.2 million for this quarter and we continued to make progress towards our earnings objectives. While we are striving to achieve the highest sales revenues in our history this year, we are also focusing on longer term objectives. We opened our new plant in Coimbatore, India, in December and at the same time we are expanding production in our Korean and Chinese plants. We have also made significant investments in our North American plants to increase our output. We are building our global manufacturing capacity and at the same time increasing our presence in global markets."

Dividend

The Board declared an eligible quarterly dividend of Canadian dollar $0.08 per share, payable on March 29, 2013, to all shareholders of record as at March 15, 2013.

Conference call

Financial analysts, shareholders, and other interested individuals are invited to attend the third quarter conference call to be held on January 8, 2013, at 4:30 PM (EDT). The toll free call-in number is 1-888-224-7971, access code 21628978. A recording of this conference call will be available for seven days at 1-416-626-4100 or 1-800-558- 5253, access code 21628978.

About Velan

Velan Inc. (www.velan.com) is a world-leading manufacturer of industrial valves with sales of $437 million in its last reported fiscal year. The Company employs over 2,000 people and has manufacturing plants in 10 countries. Velan Inc. is a public company with its shares listed on the Toronto Stock Exchange under the symbol VLN.

Safe harbour statement

Except for historical information provided herein, this press release may contain information and statements of a forward-looking nature concerning the future performance of the Company. These statements are based on suppositions and uncertainties as well as on management's best possible evaluation of future events. Such factors may include, without excluding other considerations, fluctuations in quarterly results, evolution in customer demand for the Company's products and services, the impact of price pressures exerted by competitors, and general market trends or economic changes. As a result, readers are advised that actual results may differ from expected results.

Non-GAAP measures

In this press release, the Company presented measures of performance and financial condition that are not defined under Canadian GAAP ("non-GAAP measures") and are therefore unlikely to be comparable to similar measures presented by other companies. These measures are used by management in assessing the operating results and financial condition of the Company.